Nearly 50% of all Americans who have racked up student loan debt regret not choosing a cheaper college, reported the Investor Education Foundation of the Financial Industry Regulatory Authority.
In fact, many student loan holders report not fully understanding what they are getting themselves into when taking out student loans, with just 43% saying they tried to estimate monthly payments before borrowing, according to the report. the foundation’s “National Financial Capability Study”. ”
There are now 45 million borrowers who owe nearly $ 1.6 trillion in student loan debt in the United States. School loans are now the second category of consumer debt, higher than credit cards and car loans, according to the Federal Reserve. Only mortgage debt is higher.
The results come as no surprise to Daniel T. Kirsch, author of the book Sold My Soul for a Student Loan.
“We encourage everyone to go into debt and call it ‘good debt’,” Kirsch said. He suggests advising borrowers that debt is not good if their degree does not lead to a job where they can eventually earn enough to pay off the loan.
One way to do this is to limit student loan borrowing so that future monthly payments don’t consume more than 10% of after-tax take-home pay, he said. By this standard, a graduate who expects to earn $ 50,000 a year could afford a monthly payment of around $ 279. At the current federal undergraduate student loan interest rate of 4.53%, this payment would support college debt by about $ 26,800.
Average student loan debt for Class of 2018 members is higher, reaching $ 29,200, a 2% increase from the previous year, according to the Institute for College Access and Success. The average payment for a student loan is $ 393 per month.
To give borrowers temporary relief during the pandemic and the extended shutdown, the U.S. Department of Education extended President Donald Trump’s executive order suspending federal student loan payments until the end of the year and clarified that borrowers with loans held by the federal agency will have their payments automatically suspended until December 31 with no penalty or accumulation of interest.
Education Department officials have also said they plan to extend the CARES law’s hiatus on collecting delinquent federal student loans until the end of the year. They will not seek to seize the salaries, tax refunds or Social Security benefits of those in default of their student loans held by the federal government.
Ministry officials said in their statement that “any borrower whose federally-held loans default and whose employer continues to garnish their wages will receive reimbursement from those garnishments” during the extended relief period.
It’s no surprise that the most populous states have higher overall student loan debt. California, Florida, Texas and New York are among the four states with the highest total student loan outstanding among resident borrowers.